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Business environment task 1: The Principle Characteristics of English Law that Apply to the Business Environment Introduction Characteristics of Business Law Statutes – A bill passed through Parliament that gets accepted and called an ‘act’. Statutes command or prohibit something, or declare policy and get added and amended to add to a current legislation. It is considered a Primary Authority. Under Statutes there is Case law, which covers law set from opinions from court; Common law is developed by judges through decisions of courts and similar cases. It is a legal system that gives great precedent weight to common law on the principle that it is unfair to treat the same case in a different way on a different occasion, they both are similar and this is the difference. Contract Law – A contract binds a set of agreements which the law will enforce. A valid contract that will bear sustenance in court must contain an agreement, an intention to create legal relations and considerations. EU law - A body of treaties, law and court judgments which operate along side the legal systems of the EU countries. Each individual country still has its own laws. HASAWA – (Health & safety at work act) an important law which is set to ensure safe working conditions with safety measures implemented. For example, a mechanics garage must make workers wear safety boots. In the event of injuries, staff can sue due to unsafe working conditions, but as health & safety is the responsibility everybody they may not be compensated because they did not comply with the rules. If health & safety is not observed authorities reserve the right to close down or prosecute employers. How the Law of Contract Regulates Business Transactions English contract law is an influential body of law which regulates the law of contract. Its doctrines form the basis of contract law across the Commonwealth having much influence on international law. A signed offer and acceptance determines whether an agreement exists between parties. The law of contract regulates business transactions because what is contained in them must not conflict with the law of the land regarding business transactions and either party in breach of the agreement can be taken to court. Court cases are based around loss; it could be money or bad service. So, if a merchant has signed a contract to deliver 100 bags of top soil to B&Q that weigh 10KG’s each but, under weight bags would be a breach of contract. The law of contract regulates every business transaction. Miss sold a products should be refunded or a replaced. It could be that the product is deficient in content or does not do exactly what it says on the label. Sale of goods act Covering replacements on faulty goods, suitable description and services and that goods are of merchantable quality. If a consumer makes a purchase and the goods conflict with any of these laws than a small claims court is an option. The Supply of Goods and Services Act 1982, a main piece of legislation relating to businesses that supply services. Requiring businesses supplying services to carry them out with reasonable care and skill and, unless agreed to the contrary, within reasonable time and at a reasonable charge. Consumer protection act 1987, implements the European Commission's Product Liability Directive. A main purpose of the Act is to impose strict liability for defective products primarily on someone who is regarded as the 'producer' and not the supplier. Aiming to provide clear rules by which an injured person can contact the person responsible. Only applicable where the consumer has acquired a defective product which causes damage; The Act used to make it an offence to mislead consumers concerning prices of goods, services, accommodation or facilities. This part of the Act has been revoked and replaced by new legislation - Consumer Protection from Unfair Trading Regulations 2008 and the Business Protection from Misleading Marketing Regulations 2008. The Unfair Terms in Consumer Contracts Regulations 1999, were introduced to protect consumers from unfair terms in contracts which they enter into with businesses. This fact sheet describes what the regulations cover, whether your business is affected by them and explains what your business must do in order to comply. It provides guidelines only and does not cover all compliance issues. The Impact of European law on Business Organisations The European Union (EU) single market is designed to allow businesses to trade throughout the EU on an equal footing by introducing measures ridding obstacles to free trade, including clause in contracts which cause restrictions and increase costs. This is a positive legal impact for directives such as, eCommerce, insurance and banking, which have affected contract law in neighbouring states. However, the EU holds no right to regulating the law of contract of countries, so countries still have their own. For example, parties concerned come conclude where the contract will be signed therefore, which jurisdiction applies. This law helps smaller and medium sized companies (SME’s) to grow and become successful by exposing them to more opportunities due to less cross border laws when companies grow by merging, franchising and investments. ECommerce will benefit by being able to do B2B/B2C transactions online with no stringent laws and taxes within the EU, Amazon.com take full advantage. Increased cooperation from EU firms using same electronic systems reduce fraud and speeds up processes for consumers and businesses, Banking and Insurance companies will all share the same interest rates set by Germany and move money between each other with ease as they share the same currency and therefore, can tender for public sector contracts throughout Europe and commission on currency exchange. UK Insurers can insure within the EU and bank accounts can be owned by Europeans. Outlets like banks, post offices and high street store accept Euros even though we have our own currency; everyone saves on conversion fees, consumers and businesses. The above points strengthen the economy by businesses generating more revenue, turnover and income but faster. Health and Safety at Work Act 1974 (HASAWA) A primary legislation covering occupational HASAWA, UK. The Health & Safety Executive is responsible to enforce the legislation and a number of other Acts and relevant Statutory Instruments. Statutory instruments are the secondary types of legislation made under specific Acts of Parliament. These cover a wide range of subjects, from control of asbestos at work, driving, working at height etc… Employers comply by: • Provide and maintain safety equipment, like fire extinguishers and smoke alarms • Provide risk assessments, through inspections from experts • Look after the safety of others, like the public surrounding them and anyone on the premises • Provide information, training, instruction and supervision - ensure staff are aware of instructions provided Employers are forbidden from charging employees for any measures required to provide in the interests of health & safety, Employees must take care of colleague’s health and safety interests as they maybe liable, and co-operate with their employer and not interfere with HASAWA equipment. For example, building sites are regulated by the Health & Safety Executive who ruled that anyone on the building site must wear safety boots, a hard hat and tabard. HASAWA is a cost of production and cost firms money and time to comply with. Business environment task 2: Introduction Changes in the UK Business Environment that have Influenced the Logistics Industry Ccurrently, the UK business environment is recession, since 2008, causing rises in fuel and therefore, transport prices. So, consumers and businesses cut back by spending less on transport, everyone spending less is actually making the recession deeper because less demand means less need for supply, so less jobs and money for consumers on the whole. Unemployment is high during recessions, depressing the economy. Those employed worry about loosing their jobs as firms make cut backs to cut costs, possibly through cutting people’s jobs or shifts. Unaffected people are the rich to whom price makes no difference, everyone else is being cautious due to no guarantees of their finances. Unemployed people used to spend on transport to commute to and from work, with almost half of the population not paying for everyday transport to work would cause an obvious impact on the industry. Countering the recession’s affects, consumer’s cycle to destinations rather than driving, and using other modes, like the rivers on boats, using public transport to avoid the congestion charge within zone 1 and some even skate to work on cycle paths. This loss of custom gives parts of the industry a blow from consumers spending less. Even school runs are done by bus, so cutbacks by consumers mean less revenue through taxation for the government and less demand for the industry which can mean fewer jobs in some fields of it like taxis, but is mainly unaffected because travel is essential to everyone rich and poor. This has encouraged people to buy vehicles that alternative fuels like solar, which generate less revenue for the economy through tax in future but good for the consumer and the environment. Although, the majority of customers of the transport industry do not look at alternate fueling and stick to petrol and diesel vehicles regardless of rising costs and just suffer. Businesses in the industry have been affected due to rising fuel prices, closures of firms resulting in less transport needs for the goods they sell and used. Train passengers have been switching to coaches and, for the first time in two decades there has been consistent reductions in the use of air travel, taxi and cab drivers are seeing a reduction of around a third fares. Overall, the whole industry has to work harder to earn the same wage, the fact that this transport industry is saturated making for fierce competition as it pays well. Overall, parts of the industry are doing exceptional better than some, like busses and coaches as consumers save money by using them. The effects the business environment has had is, less revenue and demand for the self employed drivers due to saturation, but mainly unchanged and maybe slightly improved for government owned sectors of the industry because it is cheaper. Private bus companies and some airlines are still recruiting which reflects no negative impact for them either. It comes down to the fact that people need transport at any cost, so in this situation where consumers cutback spending, the more affordable option is used. With more people using their cars less and some not at all means less money spent by the consumer on fuel, again revenue by taxing fuel is lost, but made up in taxing the ever rising public transport costs more. Public transport links are owned by the government and private overseas firms also, which is one of the main ways that the international economy is affected by us I have used a graph to show the drop in the sales of cars during the recession in the appendices 1A. I have also have a graph 1B to depict the drop in profits for the same manufactures. In the graphs you can see that Toyota have the highest sales figures, this may be due to the fact that they were the first to make a production line LPG car which would have helped maintain a good level of sales, an example of which is in the appendices 1D. Affects the International Economy is having on our Transport Industry International economies are also having financial issues because of the global recession. The affect the international economy is having on the British transport industry is unchanged in some places and negative in many. The British economy depends on international trade quiet a lot, which compliments the British transport industry. So, international trade affects us because it affects the amount of goods coming in via logistics and especially through freight, ports serve the national interest, supporting the competitiveness of national and regional economies. The public transport industry is not as badly affected as the sector that supplies logistics solutions for businesses, such as couriers as firms such as promotional marketers who are reliant on them. Rising fuel costs push consumers out of vehicles and into other modes of transport, such as public transport and alternate fueled vehicles. This is unhelpful in bringing down the prices of fuel but to keep it rising because of the amount of money oil firms loose due to this. So, bad affects are experienced all around by economies and companies selling oil because they are not selling as much as before, so keep high prices to compensate knowing that it will still sell regardless of the price hence the price we pay. Businesses use transport regardless of the market price and they will hand charges down in order to survive. Taxi firms charge higher fares and also public transport fares to compensate the loss of revenue. As less petrol is sold, this is therefore having negative impacts on the sales of products that compliment petrol, which are vehicles. People are not purchasing new vehicles because of the price of fuel and would rather wait till the affects of the recession pass, it is unpredictable as to when that may happen due to consumer and business spending. The sea ports have experienced a demanding climate of change in recent years, which is staying. World trade continually shifts global markets and production lines making new demands on transport systems, ports particularly. Ports have been developed and managed on the principle that users pay to use and maintain facilities. Serveding the industry well, many companies previously would not have taken advantage of international trade as it was not saving significant amounts of money, but as our currency is depreciating not only businesses but consumers also take advantage of international trade consistently. This has always been the case, but more now than before causing a significant leakage of revenue in the British economy. Appendices 1E depicts how much we and the world used to buy from which countries, Japan is the example, showing how deeply this international economy will be affected because of the amount they used to push out. Because of recession many companies liquidize or go bust and firms import less because of a lack of demand than previously. Due to fewer goods coming in to the UK, there is less of a need to transport goods, less consumers buying and less businesses supplying is the reason. Some businesses, like pound shops transport more, due to high demand for their cheap prices. Consumers not wanting to spend a lot means less holiday makers travel distances that they used to, this has had a blow to the consumer aviation part of the industry meaning job cuts. desirable destinations rely on the tourism they receive from western countries, such as ours as a main form of revenue and income, so this is a major loss for countries in Asia especially who rely on tourists and related income, tropical destinations in particular. Because they have a massive loss of money from tourism they will increase prices on all their produce, leading to higher prices on the international trade and for their own citizens. Much money during the recession has left the country through invisibles because our currency is depreciating, so people feel safer to storing savings and investments in other forms, countries and in commodities. These are invisibles in the balance of payment. Balance of payment consists of two primary components, the current account and the capital account. The balance of trade is the difference between nation's exports of goods and services and its imports of, financial transfers, investments and other components are ignored, a nation is said to have a trade deficit if imports exceeds exports, which the UK does, but generates lots of money within the country through services like legal services, banking and insurance. Less obvious, but more effective methods to reduce a current account deficit include measures increasing domestic savings (or reduced domestic borrowing), including reduced borrowing by the government. Increased exports or decreased imports can counter the deficit. After the recession is over our balance of trade will positively change. Diagram taken from www.econguru.com/circular-flow-of-income/ The circular flow of income model shows linkages between the main sectors in our economy. The basic circular flow of income model is made of of two key sectors, households and firms. Households provide 'factor services' to firms, and firms provide 'factor income' to households. Factor services include labour, enterprise, land and capital. In return for these factor services, households receive factor income, which therefore are wages (for labour), profits (for enterprise), rent (for land) and interest (for capital). When households receive this income as a reward for their factor services, they use it to buy the goods and services from the firms. This is called expenditure. This model is a simplistic version, as it assumes all households income is spent on goods or services. It doesn't take into account the economic affects of the government, the finance sector and the foreign trade. Using just households and firms does not show us the leakages and injections into/out of the flow (our economy). To make the model slightly more comprehensive, another sector can be added to the existing sectors of firms and households; the government. The government receives taxes from households through VAT and income tax as well as receiving corporate tax from the firms. This constitutes a leakage. Government expenditure to households includes welfare state payments such as benefits, state pension and improving or renovating houses/areas. Firms also benefit from government expenditure, for example through their spending on helping new enterprises start up and survive. Health, transport and education are the other main categories for government expenditure. Finally, for the complex circular flow of income model to be complete, the finance sector and the foreign trade must be added, alongside firms, households and the government. Previously, it was assumed that households expenditure was to the firms only. However, households save money as well as spend it on imported goods. As households save some of their income by depositing it in banks for example, leakage from the circular flow occurs as a result. However, the financial market helps to produce injections into the circular flow as well. Banks give loans to firms who use this money to invest in capital goods (capital investment e.g. computers, machinery). Capital investment is an injection into the economy as the money will be used to purchase capital goods that will help to produce more goods and services. Finally, the last sector in the complex circular flow of income model is the foreign trade. The money from exports being sold overseas will be injected into the circular flow, whilst spending by UK customers and UK based business on imported goods represents a leakage from the economy. This is because the money from the UK households/firms to purchase the goods from abroad flows out of our economy and into the foreign economy and vice versa. Looking at this model as a whole, it's clear to see that if the withdrawals (imports, savings, tax) are greater than the injections (exports, capital investment, govt spending) the over all income in the circular flow will decrease. Similarly, if the injections are greater than the leakages, the over all income in the circular flow (national income) will increase. This could have an effect on some of the governments main economic objectives by reducing unemployment, helping economic growth occur and rise inflation.